Budgeting

Budget process is as much necessary for any online business as it is for the offline business. It not only helps to make right and timely decisions but also highlights the non performing business practices. Many online retailers do not see it as an important activity because of the misconception that it is just for traditional offline business. Second factor that stops the online retailers from budget process is its cost, which they think may be too high- while it is not so.

Cost of budget process depends upon the business model. Generally, start-up businesses have more heads to be covered under budget process in comparison to mature retailers. It can be done in-house or can be outsourced. Both have unique positives sides; selection depends upon the particular parameters. However, cost of budget process in the both the options vary at large. Therefore, the right selection of process for budget process is important to get it done at bare minimum cost. If you know enough about the technical terms and microscopic components that budget processing involves, you would certainly be able to get effective budget process at amazingly low price. The following part of this write up highlights such important factors of budget process.

Net profit is the difference between gross profit and expenses. You need to estimate revenue. To calculate gross profit, subtract the cost of sold goods from revenue. Major E-business expenses include the cost of development, maintaining and promoting (marketing) the web store. Providing world-class customer services including guidance, after sales, warranty etc also generates recurring expenses.

SEO (search engine optimization), arranging genuine e-mail lists and sending informatory e-mails, appointing new affiliates and offering more attractive discounts etc are few of those marketing activities that need considerable expenses. Generally, retailers are suggested to invest 10-12% of total revenue for customer acquisition. Retention cost includes the expenses like customer segmentation tools, promotion and e-mail campaigns etc. It is kept 5-8% of revenue.

The cost of search engine marketing includes the charges of pay-per-click, submission to different directories & search engines, banner postings and placing advertisements on relevant popular sites etc like services. The fixation of this cost entirely depends upon one's budget and may vary from $2,500 pm to $25,000 pm. Comparison Shopping Engines are effective traffic generators. Registration to these engines depends upon the size of business and nature of services or products.

The cost of affiliate marketing is generally kept around 20% of revenue; however, selection of this business marketing strategy depends upon particular business model. The cost of e-mail marketing depends upon the volume of mails in each phase. This cost can be adjusted both way according to the budget limits and response. Customer Relationship Management consumes considerably major part of marketing budget. It needs to be very effective because repeat and reference business volume solely depends upon its success.

Social Media Marketing and Mobile Marketing are relatively new marketing practices. Both of these low budget exercises have been successful in establishing brand image as well as making it popular among the masses. Content management and Imagery creation practices also help in making the brand popular and unique. This practice needs considerable good budget. Under this practice retailers modify the promotional materials and programs, offered by manufacturers, according to local market and clients. Online Merchandising is another marketing strategy that includes categorizing of products and associating them with other products, which are more in demand.

When we talk about the technology of e-store, there seems no limit because we see new developments in internet technology every day. The budget selection depends upon the facilities, an e-retailer wants. Development of E-commerce Platforms, Order Management Systems, Fulfillment and Customer service are the major activities of E-business that need special consideration. Budgets for creating E-commerce Platforms may be anywhere from tens of thousands to million dollars; budget for Fulfillment may be around 20-12 % of total revenue and budget for customer service is kept around 2-7%.

If the budget allows, retailers may opt for having Site Search costing around $2500-10,000 pm; Personalization/ Product Recommendations costing $1200-2500 pm; Ratings & Reviews costing $2000-3000 pm and Web Analytics costing $500 to 15,000 pm like facilities too.

Therefore, we see that budget process gives us enough freedom to choose our own way that suits to our business and targeted customer segment. Budget processes guide us to optimize the distribution of funds for various business activities. Because of the increased accountability, it becomes easier to improve the efforts and strategies according to the identified voids well before the loss occurring.